U.S. non-farm payrolls rose 201k in August, slightly better than market expectations. The previous two months were revised down 50k, but the hiring trend over the past six months is still healthy at 192k.
The unemployment rate remained at 3.9%, roughly where it has been since April. While headline unemployment has been steady, a broader measure of unemployment, the U-6, which includes marginally attached workers and people who work part-time for economic reasons, continued to fall. It ticked down to 7.4% in August, a notable improvement from 8.6% a year ago.
Services sector hiring was back in action in August, +178k new positions. Strength continued in business services (+53k), and health care and social assistance (+33k). Wholesale trade (+22k) and transportation and warehousing (+20k) rounded out the leading services sectors. Goods sector hiring slowed slightly to +26k new jobs. Gains were led by construction (+23k) where hiring is up a solid 4% year-on-year. Manufacturing employment was essentially unchanged in August, and is up 2% on the year.
There was a bright spark in the closely watched average hourly earnings measure, which rose 0.4% in August, beating expectations. Growth in wages on a year-on-year basis accelerated to 2.9%.
Key Implications
The U.S. job market continued to enjoy considerable momentum in August. The unemployment rate remained near its cycle low. Broader measures of unemployment have made more notable progress over the past year, showing how a strong job market is lifting prospects for a broader pool of workers. Going forward, it will become increasingly difficult to find workers to fill positions, and we would expect to see a natural slowing in monthly job gains.
The U.S. economy is barreling full steam ahead, and the Fed is expected to raise rates a quarter point on September 26th. Looking ahead, we will be watching to see if hotter wages in August was a one-month blip, or the start of a long-awaited pick up in wage growth that could raise inflation pressures higher than we currently expect.
